Introduction
To understand how 80,000 BTC could be moved from wallets untouched for 14 years, it is essential to analyze the technical foundations of the most credible hypothesis: a cryptographic exploit targeting vulnerabilities in early Bitcoin wallets.
🔬 Technical Analysis Scope
This chapter provides a detailed analysis of security vulnerabilities in legacy address formats and the sophisticated attack methods used to compromise them, presented in an accessible way to non-cryptography experts.
3.1 Bitcoin's Cryptographic Lineage: The Fading Glory of P2PKH
All wallets targeted in the July 4th incident were of the Pay-to-PubKey-Hash (P2PKH) type, the oldest and original address format in Bitcoin. Understanding the differences between this legacy format and modern standards is crucial to comprehending why these particular wallets were vulnerable.
Bitcoin Address Format Comparison
| Feature | P2PKH (Legacy) | SegWit (P2WPKH) | Taproot (P2TR) |
|---|---|---|---|
| Address Prefix | 1... | bc1q... | bc1p... |
| Signature Algorithm | ECDSA | ECDSA | Schnorr Signatures |
| Public Key Exposure | Revealed on first spend | Revealed on first spend | Can be configured to never reveal |
| Primary Vulnerability | Weak RNG in early wallet software | Transaction Malleability (fixed) | Theoretical attacks; robust design |
| Quantum Resistance | Low | Low | High |
3.2 ECDSA's Achilles' Heel: The Nonce
The cryptographic exploit at the heart of the July 4th Anomaly targets a subtle but critical component of the Elliptic Curve Digital Signature Algorithm (ECDSA), the system Bitcoin uses to verify transactions.
🔑 Critical Nonce (k)
ECDSA Signing Process:
- Private key (d)
- Message hash (h)
- Nonce (k) - One-time random number
s = k⁻¹(h + dr) mod n
⚠️ Using the same nonce twice reveals the private key!
Vulnerability Types
1. Nonce Reuse
If the same nonce k is used to sign two different messages with the same private key, the private key can be recovered using simple algebra.
Example: 2010 Sony PlayStation 3 attack
2. Biased Nonce Vulnerability
If the Random Number Generator (RNG) used to create nonce k is flawed, it may exhibit predictable patterns.
Example: 2013 Android Bitcoin wallets
3.3 The Art of Lattice Attack: Breaking Biased Signatures
When a private key is used to create multiple signatures with biased nonces, it becomes vulnerable to a powerful cryptanalytic technique known as a lattice attack.
Attack Process
Hidden Number Problem (HNP)
Each biased signature provides a small, imperfect "clue" about the secret private key.
Lattices as Geometric Tools
Mathematical clues are represented as sets of vectors in high-dimensional space.
Finding the Shortest Vector
The private key corresponds to the shortest vector in the lattice.
LLL/BKZ Algorithms
Powerful algorithms can efficiently find very short vectors.
3.4 Case Study: The "JohnnyTX" / Puzzle #130 Precedent
The feasibility of such an attack is not merely theoretical. The July-September 2024 events provided a striking public demonstration of the resources and techniques required.
2024 Breakthroughs
Puzzle #66 Solved
The puzzle with 66-bit entropy that had been unsolvable for years was broken.
Puzzle #130 Broken
The effective work required to break the 130-bit key was reduced to 2⁶⁵ operations using Pollard's rho algorithm.
🎯 Significance as Precedent
The solution of these puzzles was a critical technical precedent for the July 4th Anomaly. It was a clear signal that the attack they had planned against real-world wallets with similar weaknesses from the weak RNG era was now computationally feasible.
💡 Technical Conclusion
The combination of these factors - legacy P2PKH wallets created with flawed software, the public nature of the blockchain, and the democratization of computational power required for lattice attacks - created a perfect storm for the July 4th Anomaly.